USTR responds to Brazil WTO demands

The U.S. Trade Representative has notified the WTO that the United States will comply with an appeals panel ruling against the U.S. cotton program. What happens next is anybody's guess.

The appeals panel ruling issued on March 3 agreed with a three-member dispute panel that found most of Brazil's complaints against the cotton portion of the U.S. farm programs were valid.

Press reports said the USTR's notification of its intent to comply on April 22 did not include specifics and noted the United States requires a “reasonable period of time” to implement any changes. They also quoted a USDA official as saying the compliance issues were complex.

Undersecretary of Agriculture J.B. Penn, who represents USDA on foreign trade issues, said a number of stakeholders must be consulted before the United States was prepared to make any commitments.

The most pressing issue: prohibited subsidies — the Step 2 and Export Credit Guarantee programs — the WTO appeal panel said must be withdrawn by July 1. Other findings, including that the cotton program caused “serious prejudice” to Brazil's economic interests, do not have a timetable.

National Cotton Council leaders have been meeting with Penn and USDA and USTR officials to discuss the U.S. government's response, but have found no “clear answers. “Discussions are continuing,” NCC Vice President Gary Adams said. “If the issues do require legislative change, then that legislation obviously has to make its way through Congress.

“We've seen in the past these issues can go on for quite a bit of time,” Adams said. “One of the cases involving the European Union that started in 1998 wasn't resolved until 2004.”

The United States may face more pressure from the ongoing Doha Round of WTO negotiations than from the Brazilian complaint. WTO leaders are attempting to resolve most of the issues ahead of a scheduled WTO ministerial meeting in Hong Kong in December.

That's proving to be complicated because of the dynamics posed by the Brazil case, similar complaints against U.S. cotton subsidies from the West African cotton producing countries of Benin, Burkina Faso, Chad, and Mali and posturing by the European Union.

The European Commission's trade minister recently made a speech in Mali, criticizing the United States' lack of response to the plight of Africa's cotton farmers and urging it to follow the lead of the EU in reducing subsidies. (That brought a retort from NCC Chairman Mark Lange that the EU continues to outspend the United States on agricultural subsidies by a factor of three to one.)

The cotton industry also faces more pressure at home from some members of Congress and organizations like the Environmental Working Group who want to gut the U.S. cotton program. “I think we can expect more on the U.S. cotton program in the press,” says Adams.

If push comes to shove, the U.S. government can always leave the WTO. The U.S. cotton industry, meanwhile, will have to continue to live with the U.S. Congress and the EWG.